Major food companies, including CJ CheilJedang, Daesang, and Sajo CPK, indicted over a starch and sugar cartel, are facing mounting pressure from both deteriorating earnings and growing legal risks. Concerns are also spreading that risks could escalate further as private organizations such as the Korea Confectionery Association consider filing damages claims.
A display of sugar products at a supermarket. / News1
Industry observers say a persistent perception—that profits from collusion outweigh regulatory fines—has contributed to repeated violations. At the same time, internal control systems were often operated in a merely formal manner, further amplifying risks.
Starch and Sugar Makers Colluded for Eight Years… Repeated Violations Over Two Decades
The Fair Trade Investigation Division of the Seoul Central District Prosecutors’ Office indicted on April 23 three starch and sugar companies—Daesang, Sajo CPK, and CJ CheilJedang—along with 21 executives and employees, and a total of 25 individuals including the head of the Korea Starch and Sugar Industry Association, on charges of violating the Monopoly Regulation and Fair Trade Act.
Among them, a business division head at Daesang was arrested and indicted on April 16, while the remaining 24 individuals were indicted without detention.
Authorities found that the collusion among these companies lasted about eight years, from July 2017 to October 2025. The scale of the cartel reached approximately 10 trillion won, during which product prices were raised by as much as 60–70%. These price increases were ultimately passed on to consumers.
Earlier in February, the Korea Fair Trade Commission imposed fines totaling 408.3 billion won on CJ CheilJedang, Samyang Corp., and Daehan Sugar for colluding on sugar prices eight times between February 2021 and April 2025. The commission found that the collusion involved sales worth 3.27 trillion won during the period. Penalty levels for flour and starch syrup cases are still under review.
Notably, this is not the first time such collusion has occurred. Major firms including CJ CheilJedang and Daesang have repeatedly faced sanctions since the early 2000s across various products such as flour, sugar, animal feed, and sauces.
For instance, in April 2006, eight flour producers including CJ CheilJedang and Samyang Corp. were fined 43.4 billion won for colluding on production and prices for five years starting in 2001. In 2012, CJ CheilJedang, Samyang Corp., and Daehan Sugar were fined a combined 51.1 billion won for colluding on sugar prices and shipments for about 15 years from 1991 to 2005.
In 2011, CJ CheilJedang and Daesang were fined 1.052 billion won for colluding on discount rates for gochujang products. In 2015, 11 companies—including CJ CheilJedang, Cargill Agri Purina, and Harim—were fined 73.3 billion won for fixing compound feed prices 16 times between 2006 and 2010.
Low Fines Despite Repeated Collusion… Effectiveness of Sanctions Questioned
Industry experts point to relatively low fine levels compared to gains from collusion as a key reason why such practices have persisted for over two decades.
CJ CheilJedang’s operating profit illustrates the imbalance: it rose from around 260 billion won between 2007 and 2009 to 453.8 billion won in 2011, hovered around 800 billion won in 2016, and surpassed 1 trillion won for the first time in 2020 at 1.3596 trillion won. The company has maintained annual operating profits above 1 trillion won through 2025, recording 1.2336 trillion won in 2025 despite a 15% year-on-year decline due to weak domestic consumption and provisions for fines.
Against this scale of earnings, penalties appear relatively small. The fine imposed on CJ CheilJedang for sugar price collusion in February amounted to about 150.6 billion won—leading many in the industry to question whether sanctions are sufficiently deterrent. As long as the perception remains that collusion yields greater profits than penalties, similar violations are likely to recur.
An industry insider noted, “Short-term profit protection through collusion has ultimately created larger long-term risks. The belief that gains exceed fines has led to repeated violations, undermining both corporate credibility and financial stability.”
There are also questions about whether such long-term collusion could have been carried out solely at the operational level. While prosecutors indicted mainly working-level executives, some argue that it is difficult to rule out awareness or tacit approval by top management given the prolonged and systematic nature of the conduct.
Internal Control Failures Under Scrutiny
The effectiveness of internal control systems has also come under scrutiny. Companies had reported that compliance training and internal accounting control systems were functioning effectively, yet they failed to prevent long-term collusion.
While firms focused heavily on external risk factors such as exchange rates and raw material prices, they were relatively less attentive to internal compliance risks such as fair trade violations.
CJ CheilJedang stated that it conducts more than 10 compliance training sessions annually and performs ongoing fair trade compliance checks under a compliance officer, but failed to detect the eight-year collusion.
Daesang also assessed its internal accounting controls and risk management training as effective, yet still faced a large-scale collusion case. Sajo Daerim, meanwhile, believed its audit committee-led internal controls were functioning properly but ultimately assumed hundreds of billions of won in fair trade-related risks.
Experts view the situation as a combination of inadequate government oversight and flawed internal systems.
Hwang Yong-sik, a professor of business administration at Sejong University, said, “An eight-year collusion indicates that monitoring and oversight failed to function properly over a significant period. If repeated violation patterns existed, authorities should have taken a more proactive approach with tighter supervision and institutional improvements.”
He added, “As long as a ‘scapegoating’ structure persists—where responsibility is shifted to working-level employees—management accountability weakens, and similar violations are likely to recur. This structural issue has contributed to the prolonged collusion.”
Hwang emphasized that “if companies perceive that profits from collusion exceed the cost of penalties, they are more likely to repeat violations, undermining regulatory effectiveness.”
As solutions, he suggested stronger penalties and more advanced oversight systems. “Sanctions should be increased so that the cost of violations exceeds the gains,” he said. “Authorities should also accumulate industry-wide data to analyze recurring patterns and establish a systematic, real-time monitoring system leveraging technologies such as artificial intelligence (AI).”
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